A Financial Plan for Lee County

The purpose of this proposal is to expand on ideas that have been suggested by Board Members and Department Heads over the past several years. To establish a sound financial plan within Lee County, both reduction of expenses and generation of new revenue must be accomplished. While no single solution can achieve the necessary outcomes, this plan as a whole will move Lee County toward financial stability while promoting clarity, trust, professionalism and protecting the services residents expect and deserve. Prepare for Reduction of Income Lee County has supplemented its General Fund revenue in recent years with income from the landfill, which is under contract to pay the County about $1.8 million per year until January 1, 2014. The payments come on a variable schedule, based on the terms of the contract. The payments are deposited into the Solid Waste fund, transferred to the Capital Projects fund and transferred from that fund to other funds as budgeted and needed. The current balance of the Solid Waste fund is $1.85 million and the Capital Projects fund balance is more than $2.7 million. The 2012 budget plans to transfer $1.1 million from Capital Projects to County General, though the actual transfer amount will likely be less. At the conclusion of the current landfill contract, Republic Services, the landfill operator, will pay the County based on the actual tons of waste deposited into the landfill rather than a preset guaranteed contract amount. Recent tonnage records provided by Allied/Republic show that landfill income in post-contract years will drop to about $800,000. To account for an annual income decrease of $1 million or more, Lee County should take steps to plan for and ensure continuity of services. With current balances in the Solid Waste fund, the Capital Projects fund, and the amount still due to Lee County prior to the end of the contract, Lee County should plan to allocate funds in a way that softens the blow of the income loss and ensures a gradual transition to a lesser revenue stream and provides the best opportunity for growth going forward.

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Solid Waste Fund Capital Projects Fund Receivable from Republic Services under current contract Budgeted to Transfer out of Capital Projects, in to County General in 2012 Total

$1,858,363.53 $2,721,691.86 $4,300,000.00 ($1,100,000) $7,780,055.39

After reserving a portion of Solid Waste and Capital Projects balances for contingencies, the remainder of these revenues, in combination with receivables from Republic Services, should be budgeted on a multi-year schedule to ensure a managed transition from current income levels to a reduced income level. For example, with an estimated $7 million, over five years the County General fund could receive $500,000 per year, the Capital Repair and Improvements fund could receive $250,000 per year, a County Jail Replacement fund could receive $500,000 per year, and the remaining $150,000 per year could be reserved for contingencies. Many scenarios and funding level options exist. Another option is to base a budget on $800,000 in landfill revenue starting immediately and use current fund balances and receivables above and beyond the first $800,000 per year as a multiyear supplemental funding stream. For example, current balances and receivables above $800,000 per year would result in approximately $5.5 million available for supplemental funding. Using a consistent funding mechanism for the annual $800,000--i.e. dedicating $500,000 to County General and $300,000 to Capital Repairs and Improvements--would enable planning for supplemental funding of $1 million per year for increasing County General funding, infrastructure improvements, economic development incentives, County jail replacement, and many other options. A third option includes using a portion of the incoming money to fund ongoing County operations, a portion of the money for capital repairs and improvements, and a portion of the money to be used as working capital for economic development incentives and investments. In all cases we recommend maintaining a Solid Waste contingency fund of at least $150,000 per year.

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Funded Depreciation in the Capital Repairs and Improvements Fund To reduce unforeseen expenses and provide responsible fiscal planning, Lee County should identify capital assets, create a depreciation schedule, and budget to fund depreciation on these assets. For example, the roof of the Old Courthouse is a capital asset that costs about $45,000 and has a projected life of 15 years. Each year, Lee County should budget to deposit $3,000 into the Capital Repairs and Improvements Fund to provide for replacement at the end of the life of the current roof. Scheduled deposits into the Capital Repairs and Improvements Fund reflect the obvious need to replace capital assets on a regular basis. Between the existing balance in the Capital Repairs and Improvements Fund and the County’s insurance policy, even unforeseen events or circumstances will be tolerable from a fiscal planning perspective. Our Capital Repairs and Improvements Fund should be reactivated. Offer Economic Development Incentives New revenue sources are key to the long-term stability of Lee County. Lee County employees and department heads have made considerable progress in controlling costs and cutting budgets in recent years. Economic development provides jobs for citizens, revenue for local government, and improves the quality of life in Lee County. In order to attract economic development, Lee County should offer incentives and support for incoming or expanding businesses. Primarily, local infrastructure should be planned and improved in a way that supports economic use of currently unused or underused land. Infrastructure projects like road improvements and repairs, extension of sewer and water lines, streamlining of traffic flow, and expansion of fiber optic networks should be part of Lee County’s commitment to new or growing businesses. These infrastructure incentives directly support the targeted business and indirectly open access for other businesses on adjacent sites. [Mend fences with area municipalities] Promote Transparency and Communication on the County Website To improve communication and transparency among Board Members and the general public, the Lee County website should host committee meeting minutes, audio recordings, proposed resolutions and ordinances, meeting agendas, and all information contained in meeting packets. The information should be posted in a timely, accessible manner. Special attention should be given to ensure that documents are properly formatted, clearly named, and logically organized. Posting of this information will enable Board Members to review information prior to meetings, and allow members of the public to read reports from committees and see what will be voted on at upcoming meetings. To improve timeliness of minutes, consideration should be given to an in-meeting laptop or hired secretary to take minutes electronically during all meetings and post 3

minutes online as soon as possible following the meeting. Electronic board meeting packets should be created with links to appropriate resolutions, reports, ordinances, documents, or county code to enable Board Members to review prior to the meetings. The staff is moving towards this goal as time and funding permits. Conduct a Staffing Review Employees of Lee County provide valuable services to the citizens. Many department heads are efficient and resourceful in providing important services with limited financial resources. As with all organizations some redundancies and inefficiencies are inevitable. These issues can be difficult to identify for people working so closely on the day-to-day operations of departments. An outside firm should conduct a review of staffing levels, job tasks and job descriptions within all Lee County departments. Opportunities for cross training, change of job duties, and consolidation of responsibilities should be pursued. When retirements and resignations occur, plans should be in place to shift responsibilities, outsource duties, or otherwise improve departmental efficiency to reduce the financial cost of employment where applicable. review must be conducted by an independent organization or firm. Create Employee Compensation Reports To better communicate with employees regarding their total compensation package, Lee County should prepare and distribute clear, understandable report of salary and benefits paid to each employee each year. While salaries are the most cited and discussed aspect of employee compensation, Lee County bears considerable financial obligations in providing vacation pay, sick pay, health insurance, and pension contributions. To help employees understand their financial worth to the County, and to assist department heads and Board Members in understanding the costs of employment (the “hidden paycheck”), individual reports should be distributed to employees and aggregated reports should be distributed to Board Members and the general public. Align Responsibility with Control for Employee Benefit Costs As shown in employee compensation reports, the cost of employment is much more than just salaries. However, under current budget practices, department heads only budget for salaries. Pension contributions, health insurance, and sick pay come from separate budget lines. Since each of these are direct results of employment, these costs should be broken down and attributed to the departments whose employees receive the compensation. Cost attribution on a 4 This

department level would better illustrate the cost of doing business for each County department and better align the control a department head has over staffing with the responsibility to manage a financially sound budget. Hire a County Administrator With an annual budget of more than $18 million, Lee County should hire a County Administrator to manage countywide financial, personnel, and administrative duties. The County Administrator should coordinate County policies, contracts and planning and should assist Board Members and department heads with special projects. The specific job duties should be set in discussion with Board Members, elected department heads and County employees. The County Administrator would improve communication among decision makers, provide a single point of contact for information requests and policy questions, and promote consistency and coordination among different departments. Slightly fewer than 20% of Illinois counties have County Administrators1; to remain competitive, we should too. Although this may not seem like a large number of counties it does reflect those counties that exhibit strong focus and direction, clear and open government and have excellent economic development records. In the beginning we propose to use a portion of the solid waste contingency to fund a County Administrator position. This represents a thoughtful use of these funds and promises a positive return on our investment. Further, to reduce operating costs, we recommend that the County Board be reduced to 20 (or fewer) members after the 2020 census. The average number of board members in each Illinois County is less than152. Contract with a Professional Negotiator As has been frequently cited, Lee County is a service provider. The largest financial costs come from salary and benefits paid to the employees who provide services to the public. Collectively bargained contracts set compensation levels for the majority of County employees, and nonunion employees are typically set equal to union employees. Recent actions have enabled all collective bargaining agreements for Lee County employees to be renegotiated in the fall of 2012.

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ILCMA IACBM

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Because of the significant, multi-year financial commitments these contracts will create for Lee County, a professional negotiator should be hired to represent the County in negotiations. A contracted negotiator would bring professional experience, comprehensive knowledge of labor law, and financial acumen to these important negotiations. The Board currently uses Labor Counsel to support the work of the County Negotiating Committee. Professional negotiators will represent union employees; the County should be as well. Board Members should work with professionals to set guidelines and establish priorities for future contracts. Professional knowledge of legal issues and experience with creation of contracts would ensure that County employees and the County Board are fairly and reasonably represented in new contracts.
Respectfully submitted 06/2012 by the ad-hoc Finance Subcommittee: Ed Fritts, Dick Binder and Vern Gottel. Revision 07//08/2012

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